Why wasn the “5 percent cap” put into place when the Post Fund adjustment formula was modified by the 1992 Legislature?
The policy question of how much of the Post Fund investment gains to pay out immediately to retirees versus the need to save some of the excess to protect against a market downturn was at the forefront of the 1992 legislation that set the current Post Fund adjustment formula. The current Post Fund adjustment formula with its five-year smoothing of investment gains and losses was believed to provide sufficient leveling of investment returns in order to avoid the potential of a large deficit. The volatile investment markets of 1996-2003 proved too variable for the five-year formula to properly smooth the level of assets available for distribution to benefit recipients.
